Sarangapani Chetty vs Perumal Naidu

M. Anantanarayanan, C.J.—This Letters Patent Appeal has been instituted by the appellant before Venkatadri, J., in Appeal against Order

No. 322 of 1961. As the learned Judge himself states, the proceeding involves a question of some interest, whether a particular ground of the

insolvency enacted in Section 6, Sub-section (d)(ii) and (iii) of the Provincial Insolvency Act, can be availed of by the sole creditor of the alleged

insolvent. For the purpose of this argument which is the single ground involved in the appeal, the following facts will be sufficient.

The respondent (creditor) has a decree against the appellant in O.S. No. 153 of 1958, District Munsif''s Court, Kallakurichi. The respondent

attempted to realise the decree amount by means of four separate execution petitions, but was unsuccessful. According to the respondent, the

insolvent (appellant) departed from his dwelling-house and usual place of business, and so secluded himself, that the repeated attempts at executing

the decree failed. Thereupon, the respondent filed a petition u/s 9 for adjudication of the appellant as an insolvent, relying on the grounds of Section

6, Sub-sections (i)(ii) and (iii) of the Act.

We may take it that, on the facts, the Courts have consistently held that the insolvent (appellant) deliberately went away from his dwelling-house

and usual place of business, and secluded himself, with the intention of defeating and delaying this creditor, and preventing an execution of the

decree. The only point is whether, because there is only one creditor of the insolvent, the ground is not available, and the creditor is without redress

in the matter of obtaining the adjudication of his debtor as insolvent.

There would appear to be sufficient authorities in English law and in this country, in support of the broad proposition that the word ''creditors''

will include the singular (creditor), and that there is no basic reason in insolvency law why a person should not be declared insolvent on the motion

of his sole creditor. The learned Judge (Venkatadri, J.) has cited extracts from the Law and Practice in Bankruptcy by Williams (Seventeenth

Edition) page 63 and also from Halsbury''s Laws of England (Third Edition, Vol. II, page 290). Admittedly, the leading case on the subject in

England is In re, Hecquard L.R. (1889) 24 Q.B.D. 71 where Lord Lindley, L.J., has observed that,

If the debtor has only one creditor, this is a point to be considered by the Registrar on hearing the petition, but it cannot be laid down as a matter

of principle that if there is only one creditor, the Registrar ought to dismiss the petition.

The learned Judge has also quoted from Mulla''s Law of Insolvency in India (Second Edition at page 157), to show that the law is not different

in this country, and that the ground for the principle that even a sole creditor can obtain the adjudication of his debtor as insolvent, is that the

Official Assignee or Receiver, following the adjudication, may be able to set aside other transactions of the debtor, and may be able to realise

assets which could not be realised without the adjudication. The principle of In re, Hecquard L.R. (1889) 24 Q.B.D. 71 already cited, has been

approbated.

But, the argument of learned Counsel for the insolvent does not rest on any wide proposition that, under no conceivable circumstances, could

the sole creditor of a person obtain the adjudication of that person in insolvency. On the contrary, learned Counsel relies on certain authorities, for

the specific position that where a man attempts to seclude himself from one of his creditors, but, not necessarily from the general body of creditors,

that would not be an adequate justification for having him adjudicated as insolvent within the scope of Section 6, Sub-section (d)(ii) and (iii). The

main authority for this proposition is the Bench decision of the Rangoon High Court in Maung Nyun Tin v. Saw Eu Hoke AIR 1935 Rang. 281. In

this judgment Dunkley, J., does lay down that

Under Section 6(d), Provincial Insolvency Act, it is an essential feature of an act of insolvency that the act should be done with the intent to defeat

or delay the creditors generally of the debtor. It is insufficient to allege or to prove that the act was done with intent to defeat or delay any

particular creditor.

These observations are relied on by the learned Counsel, for advancing his argument that there could be no valid adjudication in insolvency on the

facts of the present case.

But, we are clearly of the opinion that this argument is fallacious. When we proceed into the facts of Maung Nyun Tin v. Saw Eu Hoke AIR

1935 Rang. 281, we see that there were several creditors of the parties concerned, and that the attempt was only to defeat or delay the execution

of the decree of one particular creditor, who was clearly attempting to run a race ahead of the rest. But, on the facts of the present case, this

proposition cannot apply, for, here we have only the sole creditor, who represents in himself the general body of creditors. We think it is obvious

that a man may attempt to elude or evade a particular creditor amongst several creditors, for reasons of his own, which may not at all amount to an

act of insolvency; for instance that particular creditor may be obnoxious in pursuing methods in realising his debt, even though the debtor has

sufficient means to pay off all the creditors. The decision cited has to be clearly distinguished, for in the present case, there is only the sole creditor,

and the appellant definitely attempted to evade this creditor who represents the general body of creditors, by departing from his dwelling-house

and usual place of business, and by secluding himself.

Two other decisions were also referred to, but, they are upon a different aspect altogether of the insolvency law. Ko Po Yin v. Daw Hnin Thet

AIR 1934 Rang. 242, is merely authority for the broad proposition, with regard to Section 6(b) of the Provincial Insolvency Act that, where the

effect of a transfer would only be to defeat one particular creditor, that is not a ground of insolvency. There must be a transfer made with intent to

defeat the creditors as a whole. It is this proposition of law that was affirmed in the other decision, Niyati Bhusan Ta Vs. Bejoy Chandra Ghosh

and Others, , by two learned Judges of the Calcutta High Court. That proposition in Insolvency law need not De disputed or doubted, for the very

clear reason that there could be a transfer to one of the creditors themselves, with intent to delay the particular petitioning creditor. That is not a

ground for adjudication in insolvency, though, subsequent to the adjudication, that transfer could be set aside at the instance of the Official

Assignee, and the assets realised for the benefit of the general body of creditors. Of course, if the transfer could be avoided, as not merely a

transfer to a particular creditor, but as a fraudulent preference of that creditor, that in itself would constitute a ground of insolvency u/s 6, Sub-

clause (c). The matter has been put in this form in Mulla''s Transfer of Property Act, Fifth edition, page 276, u/s 53:

The transfer which defeats or delays creditors is not an instrument which prefers one creditor to another, but an instrument which removes property

from the creditors to the benefit of the debtors.

Consequently, we are of the view that the decisions cited at the Bar, can all of them be distinguished, with reference to the facts and the situation

in insolvency law of the present case. This is a case where the facts abundantly and clearly, establish the ground of adjudication set forth in Section

6, Sub-clauses (d)(i), (ii) and (iii). The fact that the general body of creditors was represented by the sole creditor, is no reason for declining

adjudication, for the insolvency law has always recognised that the sole creditor of a debtor could obtain an adjudication in insolvency. The Letters

Patent Appeal is dismissed. The costs of the creditor will come from the estate in insolvency.